Rio Tinto has signed a $2bn deal with the largest Chinese state-owned steelmaker to expand its iron ore operations in the Pilbara region of Western Australia.
The deal with China Baowu Steel Group, Rio Tinto’s largest customer, comes against a backdrop of trade and geopolitical tension between Australia and China that has hit a number of industries including wine and barley.
Iron ore and other minerals have, however, not yet been affected, with Australia’s mining sector still highly dependent on exports to the Asian country.
Baowu has been increasingly active in Western Australia. Last month it backed a new $3bn iron ore project in the west of the Pilbara in partnership with Australian miner Mineral Resources, which could create a significant new player in the region to compete with established companies BHP, Rio Tinto and Fortescue Metals Group.
Rio Tinto and Baowu have been in partnership since 2002 but the expansion of their operations has been delayed. The new $2bn project is structured as a joint venture that is 54 per cent owned by the Anglo-Australian miner and 46 per cent by the Chinese company.
Shi Bing, chairman of Baowu Resources, said the new deal was struck with “the spirit of sincere cooperation” and the desire for further collaboration. The project is subject to approval from the Australian, Western Australian and Chinese governments, with production due to begin in 2025.
Rio shares slipped 1 per cent on Wednesday as the broader Australian market fell sharply following US inflation numbers.